Pre-funded long term care remains unlikely

It’s been several years since pre-funded long term care plans were available from insurance companies.

The last remaining policy was removed from the market by Partnership back in July 2010, signalling the end of that type of product in the UK.

Pre-funded long term care products allowed customers to make an upfront payment into an insurance product which would pay out in the event of them needing care in the future.

Take up of these pre-funded long term care products was very limited, due to the uncertainty of people needing care in the future. Partnership reportedly only sold 21 of them in the year before the product was removed from the market.

The lack of options for insuring against the future cost of care means that people have generally needed to wait until the point of entering a care home before planning for the future.

As things stand, there are only two providers of immediate care annuities in the UK market.

The Government plans to introduce a £72,000 lifetime cap on care costs could help to stimulate the immediate care market, although consultants Ernst & Young believe it is unlikely to see insurers returning to the pre-funded long term care market.

In a report published yesterday, Ernst & Young EMEIA financial services manager Dan Mahony explained that the reforms proposed by the coalition do not overcome the principal objections to purchasing a pre-funded care plan.

“In a market where it is difficult enough to persuade people to make adequate provision for their income in retirement, expecting a significant number of customers to save or set aside funds for the possibility they will require long-term care is a huge leap of faith.

“These changes, despite providing marginally more certainty over the potential costs, do very little to make the pre-funded option a more attractive prospect – not least because the ‘hotel’ costs remained uncapped as a potential liability”.

Planning for the cost of care – either at the point of need or ahead of needing care – is becoming increasingly important in a society where we are living for longer and the likelihood of needing long term care before we die is significant.

Only specifically qualified advisers are permitted to advise on immediate care annuities, so do speak to us if you have concerns about the cost of care and need to review all of your options.

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